A company has profit after tax of Rs. 300,000 and ordinary shareholders' equity of Rs. 2,000,000. What is its return on equity?
Correct answer: C. 15%
- A. 10%
- B. 12%
- C. 15%
- D. 20%
Explanation
Return on equity is calculated as profit after tax divided by ordinary shareholders' equity. Rs. 300,000 divided by Rs. 2,000,000 equals 15%.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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